Current Yield

Ignoring the Reality of Junk

High-yield bonds have looked expensive for so long that it feels like they could remain that way indefinitely.

Just about everybody agrees that junk bonds look seriously overvalued. And just about everybody keeps buying them.

Someday behavioral economists may look back at today's high-yield bond market as a textbook study in how investors can continue to buy something even when they believe it's significantly overpriced. In this case, the buying is partly based on the faith that other people will keep buying too, because defaults don't look like an imminent problem and yields, though paltry by historical measures, are better than...